Employee compensation plans

The Company maintains various employee compensation plans for the benefits of its employees. The two types of employee compensation plans are granted under share-based compensation and cash-based compensation plans.

Share-based Compensation

Equity Incentive Plan

Under the Company’s 2006 Equity Incentive Plan, adopted December 11, 2006 and amended December 2011, and its 1996 Equity Incentive Plan, as amended March 10, 2005 (together “EIP”), the Compensation Committee of the Board of Directors of the Company could grant options to purchase Class A Stock, Class A Stock awards and restricted Class A Stock awards to officers and key employees of the Company and its subsidiaries. Options were generally granted for a five-year term and generally vest at the rate of 25% of the amount granted on the second anniversary of the grant, 25% on the third anniversary of the grant, 25% on the fourth anniversary of the grant and 25% 6 months before expiration. The EIP has been amended, restated and replaced by the OIP, discussed below.

Employee Share Plan

On March 10, 2005, the Company approved the Oppenheimer & Co. Inc. Employee Share Plan (“ESP”) for employees of the Company and its subsidiaries to attract, retain and provide incentives to key management employees. The Compensation Committee of the Board of Directors of the Company could grant Class A Stock awards and restricted Class A Stock awards pursuant to the ESP. ESP awards were generally awarded for a three or five year term which fully vest at the end of the term. The ESP has been amended, restated and replaced by the OIP, discussed below.

Oppenheimer Holdings Inc. 2014 Incentive Plan

On February 26, 2014, the Company adopted the Oppenheimer Holdings Inc. 2014 Incentive Plan (the "OIP"). The OIP amends, restates and replaces two separate plans previously in place, the EIP and ESP (the "Prior Plans"), as described above.

The OIP plan permits the Company to grant options to purchase Class A Stock, Class A Stock awards and restricted Class A Stock awards to or for the benefit of employees and non-employee directors of the Company and its affiliates as part of their compensation. After February 26, 2014, no additional awards shall be made under the Prior Plans, although outstanding awards previously made under the Prior Plans shall continue to be governed by the terms of the applicable Prior Plan.

Oppenheimer Holdings Inc. Stock Appreciation Right Plan

Under the Oppenheimer Holdings Inc. Stock Appreciation Right Plan, the Company awards stock appreciation rights (“OARs”) to certain employees as part of their compensation package based on a formula reflecting gross production and length of service. These awards are granted once per year in January with respect to the prior year’s production. The OARs vest five years from grant date and settle in cash at vesting.

Restricted stock - The Company has granted restricted stock awards pursuant to the EIP, ESP and OIP. The following table summarizes the status of the Company’s non-vested restricted Class A Stock awards under the EIP, ESP and OIP for the year ended December 31, 2014:



	Number of Class A Shares Subject to Restricted Stock Awards		Weighted Average Fair Value		Remaining Contractual Life
Nonvested at beginning of year	1,247,476		$	17.87	2.0 Years
Granted	345,260		22.26		2.2 Years
Vested	(219,180	)	11.72		—
Forfeited or expired	(134,210	)	18.43		—
Nonvested at end of year	1,239,346		$	20.12	1.7 Years

At December 31, 2014, all outstanding restricted Class A Stock awards were non-vested. The aggregate intrinsic value of restricted Class A Stock awards outstanding as of December 31, 2014 was approximately $28.8 million. The aggregate intrinsic value of restricted Class A Stock awards that are expected to vest is $27.9 million as of December 31, 2014. During the year ended December 31, 2014, the Company included approximately $5.6 million ($5.0 million in 2013 and $3.4 million in 2012) of compensation expense in its consolidated statements of operations relating to restricted Class A Stock awards.

As of December 31, 2014, there was approximately $9.6 million of total unrecognized compensation cost related to unvested restricted Class A Stock awards. The cost is expected to be recognized over a weighted average period of 1.7 years.

At December 31, 2014, the number of shares of Class A Stock available under the EIP and the ESP, but not yet awarded, was 998,615.

On January 28, 2015, the Company awarded 14,000 restricted shares of Class A Stock to its non-employee directors under the OIP. These shares of Class A Stock will vest as follows: 25% on July 27, 2015, July 1, 2016, July 1, 2017 and July 1, 2018.

On January 29, 2015, the Company awarded 31,690 restricted shares of Class A Stock to an executive officer of the Company pursuant to the OIP. This award cliff vests on January 28, 2018 and will be expensed over three years.

On January 29, 2015, the Company awarded a total of 133,681 restricted shares of Class A Stock to current employees pursuant to the OIP. Of these restricted shares, 59,876 shares will cliff vest in three years and 73,805 shares will cliff vest in five years. These awards will be expensed over the applicable three or five year vesting period.

On February 26, 2015, the Company awarded 13,795 restricted shares of Class A Stock to an executive officer of the Company pursuant to the OIP. This award cliff vests on February 25, 2018 and will be expensed over three years.

On February 26, 2015, the Company awarded a total of 138,900 restricted shares of Class A Stock to current employees pursuant to the OIP. These restricted shares will cliff vest in five years and will be expensed over the five year vesting period.

Stock options - The Company has granted stock options pursuant to the EIP and OIP. The fair value of each award of stock options was estimated on the grant date using the Black-Scholes model with the following assumptions:



				Grant Date Assumptions
	2014			2013			2012			2011			2010
Expected term ⁽¹⁾	5 years			5 years			5 years			5 years			4.5 years
Expected volatility factor ⁽²⁾	56.31		%	53.82		%	54.95		%	52.52		%	48.58		%
Risk-free interest rate ⁽³⁾	1.49		%	0.84		%	0.70		%	2.00		%	2.62		%
Actual dividends ⁽⁴⁾	$	0.44		$	0.44		$	0.44		$	0.44		$	0.44


(1)	The expected term was determined based on actual awards.


(2)	The volatility factor was measured using the weighted average of historical daily price changes of the Company’s Class A Stock over a historical period commensurate to the expected term of the awards.


(3)	The risk-free interest rate was based on periods equal to the expected term of the awards based on the U.S. Treasury yield curve in effect at the time of grant.


(4)	Actual dividends were used to compute the expected annual dividend yield.

Stock option activity under the OIP and EIP since January 1, 2013 is summarized as follows:



	Year Ended December 31,
	2014					2013
	Number of Options			Weighted Average Exercise Price		Number of Options			Weighted Average Exercise Price
Options outstanding at beginning of year	72,573			$	24.46	86,803			$	23.35
Options granted	2,976			23.49		951			17.20
Options exercised	(15,000		)	12.33		(12,165		)	12.30
Options forfeited or expired	(15,000		)	33.22		(3,016		)	39.45
Options outstanding at end of year	45,549			$	25.50	72,573			$	24.46
Options vested at end of year	30,513			$	25.99	45,683			$	23.34
Weighted average fair value of options granted during the year	$	9.94				$	6.60

The aggregate intrinsic value of options outstanding as of December 31, 2014 was $12,000. The aggregate intrinsic value of vested options as of December 31, 2014 was $1,600. The aggregate intrinsic value of options that are expected to vest is $11,400 as of December 31, 2014.

The following table summarizes stock options outstanding and exercisable as of December 31, 2014:



Range of Exercise Prices	Number of Options Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price of Outstanding Options		Number of Options Exercisable (Vested)	Weighted Average Exercise Price of Vested Options
$17.20 - $25.00	8,216	2.28 Years	$	22.45	3,097	$	24.27
$25.01 - $26.21	37,333	1.00 Year	26.18		27,416	26.19
$17.20 - $26.21	45,549	1.23 Years	$	25.50	30,513	$	25.99

The following table summarizes the status of the Company’s non-vested options for the year ended December 31, 2014:



	Number of Options		Weighted Average Fair Value
Nonvested at beginning of year	26,890		$	10.86
Granted	2,976		9.94
Vested	(14,830	)	11.38
Nonvested at end of year	15,036		$	10.17

In the year ended December 31, 2014, the Company has included approximately $133,600 ($158,200 in 2013 and $164,200 in 2012) of compensation expense in its consolidated statement of operations relating to the expensing of stock options.

As of December 31, 2014, there was approximately $74,300 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the EIP. The cost is expected to be recognized over a weighted average period of 1.23 years.

On January 29, 2015, the Company awarded a total of 4,177 options to purchase Class A Stock to current employees pursuant to the OIP. These options will be expensed over 4.5 years (the vesting period).

OARs - The Company has awarded OARs pursuant to the Oppenheimer Holdings Inc. Stock Appreciation Right Plan. The following table summarized the status of the Company’s outstanding OARs awards as of December 31, 2014:



Grant Date	Number of OARs Outstanding	Strike Price		Remaining Contractual Life	Fair Value at December 31, 2014
January 19, 2010	235,890	$	30.68	18 Days	$	—
January 13, 2011	326,480	26.35		1 Year	1.63
January 19, 2012	366,650	18.94		2 Years	5.71
January 14, 2013	403,340	15.94		3 Years	8.36
January 14, 2014	508,550	23.48		4 Years	6.94
	1,840,910
Total weighted average values		$	22.36	2.4 Years	$	5.17

At December 31, 2014, all outstanding OARs were unvested. At December 31, 2014, the aggregate intrinsic value of OARs outstanding and expected to vest was $4.5 million. In the year ended December 31, 2014, the Company included approximately $380,100 ($4.1 million in 2013 and net credit of $590,000 in 2012) in compensation expense in its consolidated statement of operations relating to OARs awards. The liability related to the OARs was approximately $3.4 million as of December 31, 2014.

As of December 31, 2014, there was approximately $5.3 million of total unrecognized compensation cost related to unvested OARs. The cost is expected to be recognized over a weighted average period of 2.4 years.

On January 9, 2015, 567,600 OARs were awarded to Oppenheimer employees related to fiscal 2014 performance. These OARs will be expensed over 5 years (the vesting period).

Cash-based Compensation Plan

Defined Contribution Plan

The Company, through its subsidiaries, maintains a defined contribution plan covering substantially all full-time U.S. employees. The Oppenheimer & Co. Inc. 401(k) Plan provides that Oppenheimer may make discretionary contributions. Eligible Oppenheimer employees could make voluntary contributions which could not exceed $17,500, $17,500 and $17,000 per annum in 2014, 2013 and 2012, respectively. The Company made contributions to the 401(k) Plan of $1.2 million, $1.3 million and $1.1 million in 2014, 2013 and 2012, respectively.

Deferred Compensation Plans

The Company maintains an Executive Deferred Compensation Plan (“EDCP”) and a Deferred Incentive Plan (“DIP”) in order to offer certain qualified high-performing financial advisers a bonus based upon a formula reflecting years of service, production, net commissions and a valuation of their clients’ assets. The bonus amounts resulted in deferrals in fiscal 2014 of approximately $8.6 million ($8.5 million in 2013 and $8.1 million in 2012). These deferrals normally vest after five years. The liability is being recognized on a straight-line basis over the vesting period. The EDCP also includes voluntary deferrals by senior executives that are not subject to vesting. The Company maintains a Company-owned life insurance policy, which is designed to offset approximately 60% of the EDCP liability. The EDCP liability is being tracked against the value of a benchmark investment portfolio held for this purpose. At December 31, 2014, the Company’s liability with respect to the EDCP and DIP totaled $49.6 million and is included in accrued compensation on the consolidated balance sheet at December 31, 2014.

In addition, the Company is maintaining a deferred compensation plan on behalf of certain employees who were formerly employed by CIBC World Markets. The liability is being tracked against the value of an investment portfolio held by the Company for this purpose and, therefore, the liability fluctuates with the fair value of the underlying portfolio. At December 31, 2014, the Company’s liability with respect to this plan totaled $16.0 million.

The total amount expensed in 2014 for the Company’s deferred compensation plans was $11.4 million ($17.8 million in 2013 and $12.1 million in 2012).